In the run-up to the Budget 2024, ET Online conducted a survey to get a sense of what India is looking for in the upcoming Union Budget. The survey received responses from nearly 9,500 Economic Times readers.
Over 34 per cent of respondents believe that inflation being under control is the best thing about the Indian economy at the moment. More than 29 per cent of respondents opted for the country’s healthy forex reserves as a key strength. Nearly 24 per cent chose the healthy balance sheets of businesses, while 12 per cent appreciate the ease of doing business in the current economic climate.
This comes in contrast to widespread public concerns about rising prices of items from onion and tomato to gourmet selections, while they demand income tax cuts that have largely eluded them in the Budget since 2014.Coming to the ugly part, over 51 per cent identified continuous jobless growth as the most significant risk factor for the Indian economy. This is followed by global uncertainty, which nearly 23 per cent of respondents believe could pose a threat. Coalition compulsions are considered a risk by over 16 per cent, while 9 per cent see the stiff climate challenge as a potential risk factor for the economy.
ET OnlineThe Good – Inflation and Forex
Roughly one-third of the respondents selected inflation under control as being the best thing about the economy at present.
India’s retail inflation quickened for the first time in five months in June, rising to 5.08 per cent due to higher food prices. This marked an increase from the 12-month low of 4.75 per cent recorded in the previous month. Food inflation, which accounts for around half the overall CPI basket, quickened to 9.55 per cent in June from 8.69 per cent in May and 4.55 per cent in June 2023.The RBI is mandated to ease inflation to 4%, with a 2% leeway on either side.
Retail inflation for all segments of food – cereal and products, meat and fish, egg, milk and products, oils and fats, fruits, vegetables in particular, pulses and products, sugar, spices, prepared snacks, and sweets – rose month-on-month.
Meanwhile, India’s forex reserves hit an all-time high of $657.16 billion, as per data available till July 5. Gold reserves expanded by $904 million to $57.43 billion.
Having high foreign exchange reserves is crucial for India in the global economic landscape. It provides a safety net against economic shocks and uncertainties, such as sudden capital outflows or currency volatility. High reserves ensure that the country can meet its international payment obligations and import essential goods, even during financial crises. This stability enhances investor confidence, attracts foreign investments, and supports a stable currency.
The bad – Global uncertainty and coalition pressure
On the geo-political front, two wars bring a lot of uncertainty to the global economic landscape and India can’t be completely immune. The central bank’s piling up of gold can be taken as a precautionary measure amidst the uncertainty.
RBI bought 1.5 times more gold in Jan-Apr 2024 than in the whole of 2023. It added some 24 tonnes in those three months – up from 803.6 tonnes in December 2023 to 827.7 tonnes in April 2024.
On the political front, Prime Minister Narendra Modi returned as the prime minister for a third term but with a weaker mandate for BJP and with support of allies. Now, BJP’s key allies Chandrababu Naidu and Nitish Kumar are together asking for $5.75 billion of federal funds, which might disturb the government’s fiscal calculations, according to media reports.
The Ugly – Jobless growth
For 2,216 job vacancies in a company, more than 25,000 job seekers gathered in Mumbai and caused a stampede-like situation. While this may indicate the job concerns, it also comes when India grew 8.2 per cent in FY24 and has managed to grow at an average of 8 per cent in the last three years.
Jobless growth is a situation where economic growth does not lead to job creation.
According to a recent International Labour Organization report, India’s youth accounted for almost 83% of the unemployed workforce. The government denied this finding and questioned the inconsistency in data sets and misinterpretation of data on youth employment and ignoring international mobility as well as gig and platform workers data.
According to a Citi report, India will struggle to create sufficient employment opportunities even with a 7 per cent growth rate, which the government again refuted saying “it does not analyse all official data sources available in the public domain”.
“According to the Periodic Labour Force Survey and RBI’s KLEMS data, India has generated more than 8 crore (80 million) employment opportunities from 2017-18 to 2021-22. This translates to an average of over 2 crore (20 million) employment per year, despite of the fact that the world economy was hit by COVID-19 pandemic during 2020-21 which contradicts Citigroup’s assertion of India’s inability to generate sufficient employment,” the government said.